Dish TV India – A Critical Analysis

Why would a Senior Management Personnel Not answer what is Debt/Equity ratio of company

I was randomly just watching business news channel (whenever I want some fun I put on Biz channels in morning at around 9 AM when guys give ways to make money in next 3-4 hours!!!) and came across startling fact whereby a Dish TV senior management personnel on TV did not answer – what the debt to equity ratio of the company is and gave an evasive reply . (Early week of December)

Couple of days later I heard same thing from someone senior from a company WWIL refuse to answer the Debt to equity ratio question . It was amazing and that led me to dig a bit deep into what are these companies where the management just DOES NOT answer the most basic question – What is the Debt Equity Ratio of your Company ?

Ben Graham’s Advice

I will start off this analysis by quoting the real Guru (Benjamin Graham) who laid down rules of investment around 80 years ago which are:

“You may take it as an axiom that you cannot profit on Wall Street (or Dalal Street) by continuously doing the obvious or the popular thing.”

“What seems to be obvious and simple to the people in Wall Street, as well as to their customers, is not really

Obvious and simple at all . You are not going to get good results in security analysis by doing the simple, obvious thing of picking out the companies that apparently have good prospects — whether it be the automobile industry, or the building industry, or any such combination of companies which almost everybody can tell you are going to enjoy good business for a number of years to come. That method is just too simple and too obvious — and the main fact about it is that it does not work well.”

Here is a tricky and tough(if you can call it with these terms) question for you regarding investing in a particular stock –Will you invest your money to buy stocks of a company whose performance summary is following :

Talking about consistency it has made consistent losses(Negative Net Profit) for last 7 years with losses increasing from Rs.16 crores to 1600 Crores.

The cumulative total Net Profit it has made is grand sum of Rs.2 crores on a cumulative 3 year sales of Rs.105 Crores in years 2002-2004.

Total cumulative losses for last 7 years are equal to almost Rs. 5248croresONLY.

It has NEVER been a free cash flow company in its entire history of existence and its almost impossible that it will have a free cash flow in the coming near future.

It has a negative net worth for last 3 years and almost sure to have negative net worth in coming 2 years at least.

It has NOT paid a dividend till date (don’t start to argue that it is behaving like Microsoft, Google or Berkshire) not because it was investing the profit for greater return in business but purely because it just CANNOT pay dividends.

It is unable to pay back and manage even its working capital to an extent that it has changed working capital limits to working capital term loan(in plain English not enough money to pay you now ,come back after some years).

Forget working capital it is even unable to pay interest on the loans taken and hence it converted interest on loans from banks funded interest term loan repayable in 9 years including 2 years moratorium (plain English I am bankrupt to an extent I cannot even pay interest even in next two years, and banks happily said YESSS. Try saying to ICICI or SBI that you cannot pay EMI on your home loan because of some emergency in your family for say 6 months or so and see the fun!!!!They will first grab your collar, then your neck, then your house and then they will start talking!!!)

After being unable to pay money due on time and amazingly ‘requesting’ and getting banks to postpone paying up, the company has in fact been able to secure even more debt from the same bankers.(Try doing that with your car loan or house loan where after you default on payment of even miniscule amount or just a small delay– you are going to be kicked out of office of any bank where you go for loan almost forever or charged a rate which would be absurd).

Forget paying someone whom you owe money to, the company has gone a step further in NOT paying the TDS (worth 422 crores) and service tax for such a long term(greater than 6 months) that auditor had to mention it in Annual report . (You poor salary earning individual , you do not have a choice , you get the money only after the govt had its cut through the company. Alas the govt can also be fooled by companies like that who take your money and keep using it for as long as possible. )

A company which actually tried to raise more money than its whole market cap via GDR. Can you believe the ambitions and positive outlook of the company??(Of course you guessed it right what would have happened to GDR )

The company is so asset starved that security includes intangibles like the Brand name of company(Word secured has a different meaning for these bankers who have lent money).

Its a company (not a bank) where its Chairman says “realistic estimation of total assets both quoted and unquoted (carried in the Balance Sheet at cost) would exceed Rs 12,000 crores but the market value of the company is around 1/10th of the estimate by the Chairman.(So either market is stupider by 10 times and Chairman is wiser by 10 times or vice-versa ).

It is perhaps the only company which in its annual reports shows performance comparison to NSE and BSE by showing the ‘Volume’ of shares traded. Yes that’s volumes of share traded and NOT the price because if it shows the price then it would look ‘interesting’ to the say the least. Read further to know about this “Great” company

Organized Retail will NOT be as successful and profitable in India as is projected by Everybody

Now that is a very bold(someone will say stupid) prediction to make when everyone sees 100s of malls seemingly springing up every corner of town and full of thousands of shopping hungry people .

I have not come across any article on net which even remotely says that Organized Retail in India will NOT really be that successful as it is generally predicted to be. In fact after FDI in multibrand retail has been increased to 51% not one article came in any prominent newspaper which said that the Walmarts , Tescos of the world may not succeed in India . Everyone just automatically does following conclusion from some facts –

India Growing country ( 7-8% + GDP growth)

Has young population and a huge middle class who are earning a lot

Organizedretail is just about 5%

Directly implying that when OrganizedRetail becomes at least 15% there will be so many players who will make tons of money .

But I doubt anybody really has thought that may be India’s Organized retail will at least for coming 2 decades will NOT have a penetration level as it is made out to be . Even if penetration level does go up considerably still it will NOT be profitable enough for the players/investors in the market .

Business Consultants if they read this post are not going to like my thoughts at all. But I am writing this mainly warning to the prospective foreign retailers who plan to be entering India in coming months and years in the hope of growing profitably based on ONE SIDED ppts/docs given by the so called retail experts/consultants from India. I hope I am proven wrong in coming decade or two.

Came across Fitch ratings on India in 2006http://www.rediff.com/money/2006/jan/18fitch.htm
Rating of India — BB+
Highlights (Heading of arcticle was Fitch warns India on mounting debt/GDP ratio)Despite rapid economic growth of 8.1 per cent in the first half of this fiscal, global credit rating agency Fitch has warned India’s “weak public finances” will constrain higher growth in medium term.

The international rating agency also forecast a current account deficit of 1.6 per cent of GDP for 2005-06

n a latest report, Fitch was of the view that changing household savings behaviour, coupled with rising private sector demand for investor funds, suggest that in absence of a fiscal correction higher growth in India was going to become increasingly dependent on external financing.

“We do not believe that India’s public debt dynamics are explosive. Nonetheless, the fact that the debt/GDP ratio has continued to edge up to over 85 per cent even as growth has accelerated to 7-8 per cent indicates that India is unlikely to simply outgrow its debt burden,” Rawkins said.

Iceland Rating by Fitch in same year .
The long-term foreign and local currency IDRs are affirmed at ‘AA-’ (AA minus) and ‘AAA’ respectively. The country ceiling is also affirmed at ‘AA’ and the short-term foreign currency rating at ‘F1+’.
Thus, credit growth of over 30% per annum continues unabated, the current account deficit expanded to 15% of GDP in 2005 and net external debt has climbed to well over 400% of current external receipts.

Private consumption and investment have been slow to respond to policy tightening and the current account deficit will breach 20% of GDP this year, up from 16% in 2005, driving gross external debt up to some 360% of GDP,

Fitch acknowledges that net external debt ratios are lower on account of a rapid build up of financial assets abroad, but says that at 357% of current external receipts in 2005 Iceland remains the most heavily indebted of any Fitch-rated sovereign.

Infact at the height of borrowing binge the Debt to GDP was almost 10 times . Can you believe that

Of course after the rating India has had almost 7-8% growth per year for last 6 years and Iceland got bankrupt, bailed out by IMF and countries are still suing Iceland for recovery of dues, Negative GDP growth for 3 years –all within one and half years of being rated AA by Fitch .

Of course that does not mean that Fitch has improved itself .
Even today
Iceland Rating — BB+ (
India Rating — ‘BBB-‘ (avg India GDP growth over last 10 years — 7+% with forex reserves in excess of $300 billion )

Iceland had to take a loan of $10 Billion from IMF and other countries which was almost equal to its GDP to be bailed out . Can you imagine if India had to do that ?? Who will provide almost $900 billion to India ?? or indeed a case where this might happen ??

How on earth is Fitch rating ??
This just confirms my immense hatred towards all the rating agencies
Is that a joke for god’s Sake ??

My prediction is that even after 100 countries go bankrupt which will keep on proving Fitch is wrong still they will keep on rating just like they have done above .

Anybody who invests or uses any kind of official rating by these institutions is sure to dig his own grave